The document outlines the transition process for Indian companies to adopt IFRS, specifically hedge accounting norms, by FY-12, with a recommendation for earlier compliance. It highlights the challenges companies face in understanding the new framework, particularly concerning derivatives and hedge effectiveness testing, and offers customized guidance and valuation services. Two case studies illustrate the successful implementation of these practices for companies needing to finalize accounts efficiently while navigating the complexities of IFRS compliance.

1. IFRS TRANSITION July 2010 CONFIDENTIAL © Mecklai Financial Services Limited 2008. No part of this document can be circulated or reproduced in any form without prior approval of Mecklai Financial Services Limited

2. A Time Of Transition Indian companies need to adopt IFRS (hedge accounting norms) by FY-12; ICFAI encourages earlier compliance Switch over / parallel accounting from the current financial year is highly recommended Under IFRS, financial statements will look different and P&L sensitivity to market movements will rise This will be further accentuated in cases where companies have used financial derivatives (forwards, options, swaps, structured products) to hedge their risks

3. Challenges Companies need to be able to understand how this new framework will reflect their performance More specifically, how different market activities will reflect in this new framework Can be very time consuming to ensure full compliance with the new standards, in terms of Determining fair value of FC loans and hedges Recognizing/derecognizing and reclassifying assets Effectiveness testing of hedges Currently, there is a limited pool of trained resources with IFRS expertise

4. For First-Time Implementation We provide a customized guidance document for hedge accounting under AS30 List in detail the accounting requirements for the transition Prepare a sample hedge document (to be filled in for all hedge transactions) Provide illustrative valuation for all derivative instruments and effective tests for all hedges Interface with your auditors and accounting team to finalize best accepted practices

5. Annual services We provide quarterly/annual (certified) valuations of outstanding derivatives as per AS 30 Effectiveness testing of all hedges Mediate with auditors, as necessary, to ensure that accounts preparation follows best practices in the area of valuations of financial instruments

6. Case Study 1 Concerns A $ 2 bn company, with a large number of medium and long-term option hedges, needed to develop a process to ensure that it was able to finalize its accounts within 5 days of the end of each quarter Solution Since this assignment began in 2008, there was a serious scatter of knowledge between the company and its auditors as to the correct way to conduct and present the valuations We not only provided the valuations but mediated this uncertainty to where, after 2 quarters, we were able to deliver the valuations on a timely basis Today, 6 quarters down, the company has a smooth process

7. Case Study 2 Concerns A $ 150 mn company in the IT space needed to implement AS30 The accounts team was completely new to the area Solution Studied the impact of transition to AS30 on their accounts Helped them determine how to define risk for different types of transactions Designed appropriate hedge documentation and templates for hedge accounting Illustrated effectiveness testing for different instruments Currently provide ongoing valuations

8. Other Services Debt issue / syndicated loan services Design of optimal structure, given your balance sheet and project requirements Selection of merchant bankers Negotiating all-in cost, eliminating surprise fine print Documentation Investment of issue proceeds/other surpluses overseas with yield enhancement Strategic advisory on managing FX and interest rate risk on both P&L and balance sheet FCCB Valuation

9. Please contact C. Chandrasekar 9820293423 Chetan Raman 9967799445 Prasanth Warrier 9833001369